Six months before its annual convention, the American Medical Association must determine how many rooms to reserve.
Question:
Six months before its annual convention, the American Medical Association must determine how many rooms to reserve. At this time, the AMA can reserve rooms at a cost of $50 per room. All rooms that are reserved must be paid for even if they are not used. The AMA believes the number of doctors attending the convention will be normally distributed with a mean of 5000 and a standard deviation of 1000. If the number of people attending the convention exceeds the number of rooms reserved, extra rooms must be acquired at a cost of $80 per room. Use a simulation model to determine the expected cost of the rooms for the convention for the following reservation levels: 2000, 3000, 4000, 5000, 6000, 7000, and 8000. From the above list of reservation levels, select the optimal number of rooms to reserve. Use a simulation with 2000 replicates and answer the questions below:
a) What is the optimal number of rooms to reserve?
b) What is the expected minimum cost? $
c) Construct a 95% confidence interval for the expected cost for the optimal number of rooms to reserve: ($ , $ )
Data Analysis and Decision Making
ISBN: 978-0538476126
4th edition
Authors: Christian Albright, Wayne Winston, Christopher Zappe